The Fed Just Raised Rates. Here's What It Actually Did to Your Mortgage.

On September 16, the Federal Open Market Committee voted 12–0 to raise its benchmark rate by a quarter percentage point, to a target range of 3.75%–4.00%. The reason given in the statement was direct: “Inflation remains elevated. Today's policy action will support a timelier return to the Committee's 2 percent goal.”

The day after, Freddie Mac's weekly survey put the average 30-year fixed mortgage at 6.95%, up from 6.76% the week before. That is a 19-basis-point move in seven days, and the highest reading since January 2025.

Here is what that actually means for someone buying a house — and what it does not mean.

The Fed does not set your mortgage rate

This trips up almost everyone, so it is worth being precise about.

The federal funds rate is what banks charge each other for overnight lending. Your 30-year mortgage is a thirty-year loan that gets bundled and sold to investors. Those investors are pricing off long-term expectations — inflation over decades, Treasury yields, and how much extra return they need to hold mortgage debt instead of government debt.

The two are related, but loosely, and sometimes they move in opposite directions on the same day. There have been Fed cuts that pushed mortgage rates up, because the cut signaled the Fed was worried about inflation running hot later.

What actually moves your rate is the 10-year Treasury yield and the spread that mortgage investors demand on top of it. Watch those two, not the Fed's headline number.

Which also means: do not wait for “the Fed to cut” and expect your mortgage rate to follow. That trade has disappointed a lot of buyers over the last three years.

What the move costs in dollars

Abstract percentages do not help anyone decide anything. Here is the same loan at three different rates from this year, 30-year fixed, principal and interest only.

Loan amount	Feb 2026 (5.98%)	Two weeks ago (6.76%)	Now (6.95%)
$600,000	$3,590/mo	$3,896/mo	$3,972/mo
$800,000	$4,786/mo	$5,194/mo	$5,296/mo
$1,000,000	$5,983/mo	$6,493/mo	$6,619/mo

The more useful way to read it is in buying power, not payment.

A buyer with a $5,983 monthly payment could finance $1,000,000 back in February at 5.98%. That same payment at 6.95% finances $903,795.

That is $96,205 of purchasing power gone since February — without a single home changing price.

Over just the last two weeks, the same payment lost about $19,163 in buying power. Fourteen days.

What this does to the market, honestly

Three things tend to follow a move like this, and they do not all move in the same direction.

Buyer demand thins at the margin. The buyers who were qualified at the very top of their range get pushed down a tier or out of the market for a season. That reduces competition for the buyers who remain.

Inventory stays tight anyway. This is the part people miss. Higher rates lock existing owners in. A homeowner sitting on a 3.5% mortgage is not going to sell and finance their next house at 6.95% unless something forces them to. Fewer listings, fewer buyers — the market gets thinner on both sides, and prices move far less than headlines suggest.

The rental market gets stronger. Every buyer who steps back becomes a renter for another year, and every would-be seller who cannot make the math work becomes a landlord instead. Both push rental demand up.

The net of it: this is not a crash signal. It is a thinning signal. Less volume, more days on market, more negotiating room on the homes that do sit — and very little movement in what things are actually worth.

For buyers: the move is not necessarily to wait

The instinct at 6.95% is to sit it out. Think carefully about that.

If you wait and rates fall, so does your negotiating leverage — because every other buyer who stepped back comes back at the same time, into the same tight inventory. The buyer who bought at 6.95% with a price concession and refinanced later often ends up ahead of the buyer who waited for 5.9% and then competed with nine offers.

You can change your rate later. You cannot change the price you paid.

Rates are also not a fixed number handed down from above — which brings us to the part most buyers underinvest in.

How to pick a lender right now

In a stable market, most lenders are interchangeable. In a moving market they are not, and the spread between a good one and a bad one on the same borrower can be half a point or more. On a $800,000 loan, half a point is roughly $270 a month for thirty years.

Here is what to actually look for.

1. Ask for a Loan Estimate, not a quote. A verbal rate is marketing. The Loan Estimate is a standardized federal form, and it is the only way to compare two lenders honestly — because it forces them to disclose fees alongside the rate. A low rate with $9,000 in lender fees is not a low rate.

2. Compare on the same day, inside the same few hours. Rates move daily, sometimes intraday. A quote from Monday and a quote from Thursday are not comparable, and a lender who knows that can use it.

3. Ask what they charge for points, and run the breakeven. Buying down your rate costs money up front and saves money monthly. Divide the cost by the monthly savings to get the number of months to break even. If you expect to refinance or move before that month, the buydown is a loss. In a market where rates may fall, be skeptical of expensive permanent buydowns.

4. Ask specifically about a temporary buydown — and who pays for it. A 2-1 buydown reduces your rate by two points in year one and one point in year two. In a thinner market, sellers are often willing to fund one as a concession, and the same seller who will not cut $30,000 off the price will sometimes fund a $20,000 buydown. Your lender should raise this before you do. If they do not, that tells you something.

5. Ask about the float-down. Some lenders will let you lock a rate and still capture a lower one if rates drop before you close. The terms vary widely and some charge for it. In a volatile stretch this is worth real money — and it is almost never mentioned unless you ask.

6. Get fully underwritten, not just pre-qualified. Pre-qualification is a conversation. Pre-approval is a credit check. Fully underwritten means a human underwriter has reviewed your income, assets, and credit, and the only thing left is the property. In a thin market, the buyer who can close in 21 days beats a higher offer that needs 45 — and that difference is usually worth more than a quarter point.

7. Favor a lender who will actually answer the phone. When a listing agent is weighing two offers, a lender they can reach — who picks up — is a genuine advantage. Call-center lenders lose deals on this alone, and neither you nor your agent ever finds out why. Before you commit, call your loan officer's direct line at 6pm on a weekday and see what happens.

8. Ask about ARMs, but understand what you are taking on. A 7/1 ARM can price meaningfully below a 30-year fixed. That is a real option if you genuinely expect to sell or refinance inside seven years. It is a bad option if you are telling yourself a story about refinancing that you have not stress-tested. Ask your lender what the rate becomes at the first adjustment under the worst-case cap, and decide whether you could carry that payment.

9. Watch the 15-year, if the payment works. The 15-year averaged 6.26% the same week the 30-year hit 6.95% — roughly 69 basis points cheaper. The payment is substantially higher, so it is not for everyone. But if you are putting a lot down and the cash flow works, that gap is real money.

One thing I am not going to do is tell you which lender to use. Your credit profile, your down payment, your employment structure, and your timeline all change who prices you best, and the lender who wins on one file loses on the next. Anyone handing out a single name to every client is not doing analysis.

What I will do is read the paperwork with you. Get two or three Loan Estimates, dated the same day, and bring them to me. I will go through them line by line — rate, points, lender fees, what is negotiable and what is not — and tell you which offer is actually the cheapest money, which is frequently not the one with the lowest rate on the front page.

The short version

• The Fed raised a quarter point on September 16 because inflation is still running above target.
• The 30-year mortgage average hit 6.95% the next day, the highest since January 2025.
• Since February, a buyer has lost roughly $96,000 of purchasing power on a $1,000,000 loan without any home changing price.
• This thins the market on both sides. It does not crash it.
• Your lender choice is now worth more than your timing. Shop it like it matters, because at these levels it does.

If you are trying to decide whether to buy now, wait, or restructure what you were planning — or you have Loan Estimates in hand and want a second set of eyes on them — call me at 408-781-4184 and let's look at your actual numbers instead of the headline.

Michael Katwan is a licensed California Broker Associate (DRE# 02168118) with Keller Williams Tri-Valley. He works with sellers, buyers, and landlords across the Tri-Valley, South Bay, and Peninsula.

Rate data: Freddie Mac Primary Mortgage Market Survey, week ending September 17, 2026, retrieved September 21, 2026. Fed policy: FOMC statement, September 16, 2026. Payment figures are principal and interest only and exclude taxes, insurance, and HOA dues. Not a loan offer or a commitment to lend.